World Gold Council and SSGA launch low-cost ‘MiniShares’ gold ETF

Jun 27th, 2018 | By | Category: Commodities

The World Gold Council and State Street Global Advisors have launched the SPDR Gold MiniShares Trust (GLDM US) on NYSE Arca.

World Gold Council and SSGA unveil lowest cost gold ETF

World Gold Council and SSGA have partnered to launch a low cost gold ETF.

With an expense ratio of 0.18%, GLDM is the cheapest gold ETF in terms of management fee.

“We believe GLDM is designed to provide an effective means for investors seeking the diversification benefits gold exposure may bring to a portfolio,” said Noel Archard, global head of SPDR product at State Street Global Advisors.

“Combined with a relatively low expense ratio, GLDM’s relatively low share price provides all types of investors access to gold within portfolios, and we are excited to partner with the World Gold Council on another ETF for helping clients target investment goals.”

The new ETF has been listed with per-share trading price of 1/100th of an ounce of gold, as represented by the LBMA Gold Price PM (USD). Investment in the product is backed by physical gold as opposed to synthetic exposures such as holding gold futures.

The share pricing strategy is one of two significant differences between the new fund and the seasoned $35 billion SPDR Gold Shares ETF (GLD US), the first physically backed gold ETF in the US. GLD was also born from the partnership between the World Gold Council and State Street Global Advisors. It was launched in November 2004 and represents 1/10th of an ounce of gold. With the lower entry point for GLDM, the new product will be seeking to reach a broader client base as potential gold investors.

The other difference is price. GLD charges 0.40%, which is at the more expensive end of the fee scale for gold ETFs. In an increasingly competitive ETF landscape, it appears the higher price tag is starting to wear away GLD’s market dominance. According to Reuters, at the start of 2010, GLD accounted for roughly 75% of the total gold bullion held by gold-backed exchange-traded products. However, in 2018 it now represents less than 50%.

BlackRock’s iShares Gold Trust (IAU US) – with an expense ratio of just 0.25% – has stolen some market share, growing 47% over the same period. IAU’s AUM currently stands at just over $12bn, which is roughly a third that of GLD, although this gap appears to be closing.

GLD is still popular in its own right. As the largest gold ETP available, it enjoys robust liquidity and relatively low bid-ask spreads, both highly valued characteristics, especially by institutional investors who may wish to conduct larger trades while keeping costs low.

It is potentially likely, at least in the early days of trading, that GLDM will be less liquid.

GLDM is the third physically backed gold ETP from SSGA and the World Gold Council. Their second offering, the SPDR Long Dollar Gold Trust (GLDW US), was introduced in January 2017. GLDW was the first US-listed, gold-backed ETF designed for a strong dollar environment, by combining both a long position in physical gold and long dollar exposure against a basket of six non-US currencies, providing investors with the potential benefits of gold exposure in a strong US dollar environment.

“Investors’ portfolio needs are continuously evolving, and it is important that there is a full range of physically-backed gold products available as they implement investment solutions,” said Joseph Cavatoni, managing director USA and ETFs, World Gold Council. “We are pleased to now offer a suite of solutions that are designed to align with investors’ preferred characteristics, whether it’s liquidity, trading efficiency, total cost of ownership or managing their exposures in a strong US dollar environment.”

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